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Former Ranbaxy Laboratories co-promoter and co-founder of Fortis Healthcare Shivinder Singh moving the National Company Law Tribunal against brother Malvinder Singh and former colleague Sunil Godhwani for “oppression and mismanagement of RHC Holding, Religare and Fortis” puts the spotlight on the sorry state of corporate governance in blue-chip Indian companies. Even board members and major shareholders failed to uncover the alleged diversion of funds. Could funds have been transferred out of the company without the knowledge of the CFO? If the money was transferred on the board’s informal approval, once the board refused to formally approve the transfer, was the transfer brought to the notice of the board? Did the audit committee notice the transfer and ask for an explanation?

Shivinder alleges that the duo had systematically undermined the interests of the company and their shareholders. If mis-steps have been spotted by a board member, it raises questions on the credibility of decisions taken by the management and shows how weak corporate governance is in some publicly listed companies. It is also a telling reflection on the functioning of independent directors on the boards of these companies. The board should cease to be a sinecure for retired professionals obliged to the chairman, who also doubles up, more often than not, as the managing director and CEO, but a place of active supervision on behalf of shareholders. This calls for a cultural shift, not just Sebi regulation and fact-finding. There should be checks to ensure that independent directors discharge their role effectively. It makes sense to let external experts evaluate their performance.

Sebi should also foster greater shareholder democracy that seeks better performance of companies and holds managements to account. The sorry state of corporate governance is also due to the unholy nexus, in the form of unaccounted political contributions, between companies and the establishment. Reform of political funding will improve corporate governance, among other things.